Continental Revises Full-Year Earnings - Tire Review Magazine

Continental Revises Full-Year Earnings

Reporting its second quarter and first half results, Continental Executive Board chairman Dr. Elmar Degenhart cautioned that the stronger development seen in the second quarter shouldn’t be viewed as a turnaround; rather, sales developed better due to seasonal and technical factors.

The European market – where Continental makes 55% of its sales – was described as unstable, and following what the company calls “modest development” in the region’s replacement tire market in the first half of the year, Continental states its previous estimate for the segment “no longer seems possible.” It now anticipates an “increase of 1% at best.” The company also said growth in the Asia and NAFTA regions is “also expected to diminish as the year progresses.” As a result, Continental has decreased its full-year forecast from growth of 5% to 4%, or “around €34 billion.”

Sales in the second quarter rose 4.3% to €8.54 billion and first half sales increased 0.4% to €16.57 billion. Second quarter EBIDTA was €1.31 billion, up 1.6% year-on-year, while in the first half EBIDTA declined 0.5% to €2.48 billion. Second quarter EBIT rose 2% to €883.2 million but for the first half as a whole it was down 1.5% year-on-year to €1.6 billion. EBIT margin dropped 0.3% in the second quarter to 10.3% and decreased 0.2% in the first half to 9.8% (adjusted EBIT margins were 11.5% and 10.8%, respectively). Net income rose 34.7% to roughly €0.7 billion or €3.50 per share in the second quarter and was up 13.8% cent to €1.1 billion or €5.71 per share in the first half.

For the full year, Continental continues to anticipate adjusted EBIT margin will remain above 10%. It does not foresee a sustainable recovery on the European replacement tire market, a factor contributing to declining natural and synthetic rubber prices. “Due to our global positioning and the further increase in the number of vehicles equipped with our products, we expect that consolidated sales will show stable year-on-year growth in the third quarter, but no further improvement over the second quarter,” confirmed Degenhart. “The main reason for this is that the passenger car replacement tire markets are recovering more slowly than expected, especially in Europe. We expect, moreover, that growth on the Asian markets and in NAFTA will level off over the rest of the year. By contrast, there will be positive effects from the downward trend in natural and synthetic rubber prices, chiefly attributable to restrained demand on the tire markets. We expect this to reduce the burden on the Rubber Group in the order of around €300 million in the current year.”

Continental shares fell up to 3.2% to €114.60 following the release of the Q2/H1 figures, the largest intraday drop since June 22. As of 8.45am (BST) on August 2, shares are trading at €117.45. (Tyres & Accessories)

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